April 15, 2020

Monetary Policy Committee

The Monetary Policy Committee (MPC) of the Banco Nacional de Angola (BNA) met, in an ordinary session, on 27 March 2020 to consider the recent evolution of the main economic indicators, taking into account the current international situation and its impact on the domestic economy.

In February, the National Consumer Price Index, published by the National Statistics Institute showed a monthly change of 1.72%, down from 2.05% in the preceding month, resulting in a year-on-year change of 18.74%, above the 17.95% recorded in the same period of 2019. The Food and Non-Alcoholic Beverage Class continues to exert the most pressure on prices in the economy, having contributed with 56.79%.

In the province of Luanda, the Consumer Price Index (CPI) reflected a monthly decrease of 0.36 p.p., settling at 1.48% in February compared to 1,84% in the previous month. In year-on-year terms, the inflation of this province reached 18.42%, representing an acceleration of 0.52 percentage points on the previous month (17,9%). The Food and Non-Alcoholic Beverage Class contributed with 46,25% to the inflation registered in Luanda.

In the month under review, the Wholesale Price Index increased slightly, settling at 1.74% from 1.72% in January, resulting in a year-on-year change of 19.84%, higher than that recorded in the previous month (19.35%). Imported products contributed with 14.95 percentage points to this year-on-year change, representing 75.33% of the headline change.

Although Wholesale Price Index of imported products is the main contributor to headline inflation, the variation in the domestic products (1.99%) remains above the variation of the imported products (1.67%), situation that has prevailed since mid-2018.

The Monetary Base in National Currency, an operational variable of monetary policy, influenced by net effect of the National Treasury operations, expanded to Kz 133.49 billion (9.26%), compared to a 9.09% contraction in January 2020. The expansion of the Monetary Base was reflected in the increase in the bank reserves in national currency of Kz 138.40 billion (14.40%), whilst the banknotes and coins in circulation decreased by Kz 4.91 billion (1.02%).

In the interbank money market, Kz 722.16 billion was transacted, representing a decrease of Kz 73.56 billion (9.24%), compared with the previous period. LUIBOR overnight declined from 19.98% in January 2020 to 16.94% on 27 March.

The monetary aggregate M2 in national currency, comprising of all bank deposits in national currency and banknotes and coins held by the public, contracted by 6.24% in relation to the level observed in January 2020, from Kz 4.94 billion to Kz 4.64 billion. This decrease was reflected in the deposits which contracted by Kz 299.21 billion and in the banknotes and coins held by the public which contracted by Kz 9.18 billion. The stock of banknotes and coins held by the public decreased from Kz 368.00 billion in January 2020 to Kz 358.82 billion in February 2020.

The stock of credit in national currency stood at Kz 3.5 billion, representing a monthly contraction of 0.38%, compared to the 1.78% increase in January.

In the first two months of 2020, BNA sold USD 1.29 billion to the commercial banks, of which USD 813.64 million was sold in January and USD 472.33 million in February. It is important to note that, since January 2020, oil companies operating in Angola started to sell foreign currency directly to commercial banks and the amount sold in these first two months amounted to USD 556.80 million.

The reference exchange rate in the primary market stood at Kz 492.63 per USD, approximately the same as in January.

The stock of Gross International Reserves stood at USD 16.39 billion in February 2020, down from USD 16.84 billion in January (-2.61%), equivalent to a coverage of 8.34 months of imports of goods and services.

Net International Reserves stood at USD 10.89 billion, representing a drop of 3.92% compared to January (USD 11.34 billion).

The MPC also assessed the possible impacts of the COVID-19 pandemic on the national economy, with particular attention to the external accounts, and its implications in the conduct of the monetary and exchange rate policies.

The MPC has accordingly decided to:

  • Maintain the base interest rate, BNA rate, at 15.5%;
  • Maintain the interest rate on the liquidity absorption facility with an overnight maturity, at 0%;
  • Reduce the interest rate on the liquidity absorption facility with a seven-day maturity, from 10% to 7%;
  • Maintain reserve requirement coefficients for national and foreign currencies at 22% and 15%, respectively;
  • Establish a liquidity facility with a maximum value of Kz 100 billion for the acquisition of government securities held by non-financial corporations.

The MPC also decided to:

  • Extend to the 54 products defined in PRODESI  the credit granted with recourse to the reserve requirements, and establish a minimum number of loans to be granted per bank;
  • Exempt from the limits established per type of payment instrument, the import of products included in the basic food basket, and of medicines;
  • Set April 1 as the start date for the use of the Bloomberg platform by the oil companies and by the National Agency of Petroleum, Gas and Biofuels, for the sale of foreign currency to commercial banks.
The next ordinary meeting of the Monetary Policy Committee of the Banco Nacional de Angola will be held on 27 May 2020.